Four of Japan’s major banks announced that they will be reducing interest rates on new home loans this month.
The Bank of Tokyo-Mitsubishi UFJ will reduce the prime rate on their 10-year fixed-rate home loan by 0.05 points to 0.75%. Mitsui Sumitomo Banking Corporation, Mizuho Bank and Resona Bank will also reduce the rates on their 10-year fixed-rate loans by 0.05 points. Sumitomo Mitsui Trust Bank will leave their rates at their current level of 0.70%.
10-year fixed-rates (prime rates):
- Bank of Tokyo-Mitsubishi UFJ: 0.75%
- Mizuho Bank: 0.80%
- Resona Bank: 1.05%
- Mitsui Sumitomo Banking Corporation: 1.05%
- Sumitomo Mitsui Trust Bank: 0.70%
The decrease reflects a drop in Japan’s 10-year government bond yield which currently sits at 0.005%, down from a recent high of 0.100% in July. Last week the yield reached into negative territory for the second time since late 2016, spurred on by investors seeking a safe haven amidst uncertainty following tensions with North Korea and the US political climate.
Fixed-term interest rates offered on home loans typically follow movements in the 10-year government bond yield.
The 35-year fixed-rate ‘Flat 35’ base interest rate will also decrease this month for the first time in 4 months. The minimum fixed interest rate on a 21 ~ 35 year loan with an LTV of below 90% and a loan amount of less than 80 million Yen will decrease by 0.04 points from August to 1.08%. Flat 35 interest rates were as high as 3.0% in early 2009.
The Nikkei Shimbun,
NHK, September 1, 2017.